Thursday, January 3, 2008

ABCP shows sign of stablizing

--Jan. 3 (Bloomberg) -- For the first time since the Augustfreeze in the credit markets, companies issued more IOUs backedby collateral as the cost to borrow the short-term debt fell to the lowest in 22 months. --Commercial paper backed by mortgages, credit-card loans andother assets rose $26.3 billion to a seasonally adjusted $773.8billion for the week ended Jan. 2, the Federal Reserve inWashington said today. --The 3.5 percent increase, the biggest gain in at least sevenyears, snapped a 20-week losing streak that began as losses fromsubprime mortgages caused a retreat from all but the safestgovernment debt. Yields on the paper due in 30 days posted theirbiggest weekly decline in at least a decade as investors becamemore willing to hold the debt. --Interest rates on the short-term debt due in 30 days fell1.16 percentage point this week to 4.63 percent, or 9 basispoints more than the one-month London interbank offered rate,Bloomberg data show. The spread fell from 116 basis points, orthe widest on record, on Dec. 28. In the first half of 2007, theyield on asset-backed commercial paper was on average 5.5 basispoints less than Libor. A basis point is 0.01 percentage point. ``The market's in a process of healing,'' Neilinger said. -- The broader commercial paper market rose $13.2 billion inthe most recent week to $1.8 trillion, according to the Fed data.Companies typically sell commercial paper, which usually maturesin three months or less, to help pay for day-to-day expensesincluding payroll and rent.

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